Fashion has been called the force behind most discretionary spending. It influences not only what we wear but what we do and how we live. The primary function of fashion to the producer is the creation of product obsolescence. Vance Packard has called this the obsolescence of desirability as opposed to planned obsolescence of quality. It achieves the same results as if the product were actually worn out and has the added advantage of reflecting consumer rather than producer decisions. Fashion is also used as a competitive device by the manufacturer. It serves to differentiate the product of a particular firm and results in non-price rather than price competition. The entrepreneur is less concerned with the efficient production of goods than with anticipating the changing preferences of customers. For unless there is a demand for a particular product, cost reductions are of little avail. For this reason durability of product, quality of workmanship and product price become subordinate to fashion considerations and this has important implications for the individual consumer and society as a whole.

The impact of fashion on consumer welfare is discussed here with respect to the apparel industry. The dominant role of fashion in this industry has resulted in its designations as the fashion industry and it is regarded as a model of successful demand creation by other consumer goods industries. The apparel industry is characterized by monopolistic competition. It is rather similar to perfect competition in that the number of sellers is so large that the actions of any one seller has little impact on his competitors. Each seller, however, has a separate demand curve for his product--a demand curve which is constantly shifting in response to changing consumer preferences and actions by competitors. Design ability, fashion awareness and market knowledge influence the location of the demand curve. If there is a decrease in demand less is sold in a certain price range than anticipated. Markdowns then result since unsold stock is of little use and fashion changes and the seasonal nature of apparel require the disposition of current production as soon as possible.

The uncertainty concerning consumer acceptance of particular styles encourages small scale units. The larger the business the greater the possibility of error since production plans must be made ahead of time, including the ordering of large quantities of fabric. In contrast the small firm with a shorter planning period can adjust more rapidly to changes in consumer demand. Large scale production, for the same reason, does not have the competitive advantage it has in other industries. A firm might go to the expense of setting up an assembly line system only to find that the demand for such items had declined. This could reflect changing consumer preferences or the entry of other firms attracted by high profits. Such entry is facilitated by the production technology of the apparel industry and the existence of design piracy. Brand names, which have been used by firms in other industries to maintain their market share, have been less successful in the apparel industry. This reflects consumer competence (or consumer belief in such competence) to evaluate the two most important product attributes of apparel--appearance and becomingness. Such attributes are a necessary condition to consumer acceptance.

As a result of the dominance of fashion in apparel, we have a competitive, uncertain, easy to enter industry, in which technological advances have been relatively slow. While the industry is highly competitive it does not result in lower costs or prices. Prices, in fact, are high due to absence of mass production techniques and uncertainty concerning consumer acceptance. Thus fashion inflates the price the consumer pays for the product.

An even more serious consequence for the consumer is fashion obsolescence. Fashion changes destroy the value of existing possessions in the minds of the consumer. If fashion apparel is discarded before it is actually worn out, an economic loss is endured. It has been claimed that the avoidance of such waste would enable consumers to buy other goods and services and hence increase their standard of living. Discarded apparel, in general, constitutes a total loss unlike automobiles and other durable goods where a second hand market exists.

Finally the dominance of fashion may lead to a neglect of performance characteristics by both producers and consumers. Such characteristics, however, determine to a considerable extent consumer satisfaction with the garment during its wear life. Failures related to durability, appearance retention, and ease of care have been cited by consumers as major sources of dissatisfaction. In some instances fashion may also result in products which are hazardous to the consumer. The flammable crinolines of past centuries and the maxi and platform shoes of recent times are examples.

Fashion is thus related to waste in production and consumption. Producers must operate with inefficient sized units, with excess capacity at some periods due to seasonality and uncertainty concerning consumer acceptance and may suffer losses from equipment rendered obsolete by fashion changes. Consumers pay higher prices than necessary and suffer from premature product obsolescence.

In assessing the impact of fashion on consumer welfare, however, two important questions must be answered. First, how significant is fashion obsolescence in the apparel industry, and second, to what extent is fashion imposed on the consumer?

A review of fashion changes in the European and American markets since World War II provides strong justification for the claim that fashion is evolutionary rather than revolutionary. Style changes occurred relatively slowly thus providing the consumer with time to adjust to such changes and to minimize costs. The sole exception was the "New Look" of Christian Dior and this drastic fashion change was attributed to the particular period in which it was launched--the aftermath of World War II. This single exception should not be taken as a measure of the degree of obsolescence caused by fashion.

The second question is even more important since freedom of choice is fundamental to consumer welfare. There has been much discussion concerning the origin of fashion and the degree of control exercised by industry. The structure of the apparel industry, however, indicates that the exercise of such control may be difficult if not impossible. There are many firms at each level of production and distribution and each firm has an incentive to anticipate consumer demand and to differentiate his products from those of his competitors. In practice, numerous styles are launched by the designer and manufacturer at the beginning of each fashion season, and tried out in the marketplace. Consumer acceptance determines which will become the fashion--the prevailing style. The necessity for consumer acceptance and the inability of the industry to dictate fashion was documented recently by the failure of the midi. This style was rejected by the consumer in spite of widespread adoption by manufacturers, retailers and fashion publicists.

If fashion changes are perceived to be the result of producer-consumer interaction in the marketplace then one must consider the potential benefits of fashion in addition to its costs. One recognized benefit is the role of fashion in satisfying the consumer's desire for change. The pure competition model of welfare economics does not satisfy this desire nor acknowledge the necessity for responding to changing consumer tastes and preferences. The semi-durable nature of apparel and the ability of the industry to provide cheap, speedy, reproduction of fashion goods also means that the consumer can satisfy this desire for change relatively inexpensively. While the threat of markdowns leads to higher prices than necessary for most fashion items the actual markdowns offer the prospect of considerable savings to the end of the season purchaser. This gain is at the expense of the early purchasers who have essentially subsidized the bargain hunter. The latter, however, does pay a price with respect to time and effort and uncertainty concerning the availability of the item at the end of the season.

In recent years, increased consumer independence, the large number of accepted styles at any one point of time, and the decline of clothing as a status symbol has placed the individual consumer under less pressure to conform. The individual is thus free to determine how much he or she is willing to pay for fashion. If fashion expenditures are high then presumably the perceived benefits from being fashionable are also high. Consumer advocates should recognize that while the costs of product differentiation are high the consumer has indicated a willingness to pay for such product differentiation in the marketplace.

Consumer advocates must also consider the cost to society as a whole from premature product obsolescence. Scarcity rather than surpluses characterize the economy today. Instead of querying whether demand can keep up with supply, it is now a question of whether supply can keep up with demand. In these circumstances demand restraint rather than demand creation becomes important.

Over consumption due to fashion poses two costs to society:

1) It uses up resources unnecessarily by accelerating product obsolescence.

2) It adds to the pollution problem during the process of production and when consumption is terminated--the obsolete products must be disposed of.

It might be argued that the market system and the price mechanism already takes such costs into account and that the consumer has indicated a willingness to incur such costs. However, the pricing of many resources today reflects current rather than future demand and continued depletion of our natural resources poses a serious threat to the quality of life facing future generations.

Product price also excludes the cost of environmental pollution to society since the producer is concerned only with production or private cost. In both instances the failure of the market mechanism understates the true cost of consumption to society.

While higher prices would correct this situation they would also limit the scope of fashion. Many low income consumers would find it difficult to participate in the fashion cycle. Fashion might become a class phenomenon rather than the mass phenomenon that it is today. Such a development does not necessarily mean a reduction in consumer welfare since the consumer's desire for change can still be satisfied with respect to non-tangible consumption items e.g., art, music, literature. It is possible that the replacement of fashion tangibles by fashion intangibles might result in a gain to the individual consumer as well as to society as a whole.